March 29 (Reuters) – The Federal Deposit Insurance Corp (FDIC) has hired Newmark Group Inc (NMRK.O) to sell about $60 billion of failed lender Signature Bank’s loans, a person familiar with the matter told Reuters on Wednesday.
The U.S. banking industry has been reeling from the fallout of recent failures, with regulators seeking to reassure customers their deposits were safe and that the American banking system remained healthy.
Regional bank stocks have been battered as investors stayed away from the sector amid doubts over whether the U.S. Federal Reserve would hold off on its plans to aggressively hike interest rates, which have been blamed for eroding book value of securities and sparking the biggest banking crisis since 2008.
The commercial property market is likely to see a ripple effect from the sale of a loan book this large, at a time when property values are already being squeezed, according to a report in the Wall Street Journal, which first reported the news.
FDIC declined to comment while Newmark Group did not immediately respond to a Reuters request for comment on the matter.
Earlier this month, state regulators closed New York-based Signature Bank, making it the third largest failure in U.S. banking history.
On March 19, a subsidiary of New York Community Bancorp (NYCB.N) entered into an agreement with U.S. regulators to buy deposits and loans from Signature Bank.
The subsidiary, Flagstar Bank, assumed substantially all of Signature Bank’s deposits, some of its loan portfolios and all 40 of its branches.
On Tuesday, FDIC told Signature Bank’s crypto clients they have until April 5 to close their accounts and move their money. The deposits in question were not part of a rescue deal arranged with Flagstar Bank. New York’s financial regulator had said earlier in March its decision to close Signature Bank had “nothing to do with crypto.”
Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri
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SYDNEY, March 28 (Reuters) – Brookfield Asset Management (BAM.TO) will spend about $13.3 billion over the next decade to replace Origin Energy’s (ORG.AX) Australian power generation infrastructure with new-build renewables and storage facilities, a senior executive said on Tuesday.
Origin Energy on Monday agreed to a A$15.35 billion ($10.21 billion) takeover offer from a consortium led by Canada’s Brookfield, nearing the conclusion of one of the country’s biggest private equity-backed buyouts.
Australia’s No. 2 power producer has been looking to speed up its transition to cleaner energy, accelerating the planned shutdown of the country’s biggest coal-fired power plant and selling its gas exploration assets.
“Our plan is to invest a further A$20 billion of capital to fully replace its power generation and its power purchases with green power that meets all of its customers requirements, and we propose to do that over a 10-year period well in advance of the 2050 goal,” Brookfield Asia Pacific CEO Stewart Upson told Reuters in an interview, referring to a target for net-zero direct and indirect emissions by 2050.
The Canadian firm enlisted Singaporean funds GIC and Temasek [RIC:RIC:TEM.UL] as co-investors in its bid, while MidOcean Energy will gain control of Origin’s 27.5% stake in Australia Pacific LNG (APLNG).
Upson said Brookfield currently has about $60 billion invested in Australia, but the Origin deal would represent a “step change”.
Argo Investments (ARG.AX) Senior Investment Officer Andy Forster said his firm, the ninth-biggest investor in Origin, was positive about the deal, even though it might take time to gain regulatory approvals from the Foreign Investment Review Board and the competition regulator.
“Brookfield seems very committed to making the deal happen,” he added.
Shares were trading 1% higher at A$8.255 on Tuesday morning, below the implied cash-and-scrip offer price of A$8.91 a share, as the deal is not expected to be finalised until early 2024.
The Brookfield-led consortium trimmed its offer for Origin by 1% last month after a government move to cap gas prices hit valuations in the sector.
“We had to take our time to assess all the different developments and make sure that we are comfortable it didn’t have an impact,” Upson said.
Banking industry volatility also slowed the deal, but the financing was fully committed and was not affected, he added.
($1 = 1.5031 Australian dollars)
Reporting by Praveen Menon and Scott Murdoch; Editing by Jamie Freed
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HOUSTON/CARACAS, March 23 (Reuters) – Expanded oil export contract reviews at Venezuela’s state-run PDVSA have nearly halted all commercial crude and fuel releases, as officials seek to match past invoices with payments, according to documents and people familiar with the matter.
An anti-corruption probe has led to the recent arrests of about 20 PDVSA employees, judges and politicians, and prompted the resignation of powerful oil minister Tareck El Aissami. An oil export suspension that first began in January under El Aissami has worsened, internal documents showed.
PDVSA, which accounts for most of the OPEC nation’s export revenue, delivered documents to prosecutors that revealed $21.2 billion in commercial accounts receivable in the last three years, of which $3.6 billion are potentially unrecoverable.
Across Venezuela’s export terminals, only four PDVSA customers were active this week: Iran’s Naftiran Intertrade Company (NICO), U.S.-based Chevron (CVX.N), Cuba’s state-owned Cubametales and Hangzhou Energy, according to PDVSA schedules.
NICO, Chevron and Cubametales are taking cargoes as compensation for pending debt or oil swaps, which reduces PDVSA’s risk of failed payments. Hangzhou Energy’s contract is the only one so far ratified after the audit, according to one of the sources, who spoke on condition of anonymity.
PDVSA, Venezuela’s oil ministry, Cuba’s foreign affairs ministry and a Chevron spokesperson did not immediately reply to requests for comment. Hangzhou Energy could not be reached for comment.
AUDIT EXTENDED
The anti-corruption investigation has focused on determining whether customers with contracts that required prepayments had delivered payments. More recently, officials have expanded the scope of the audit to include price discrepancies, and the performance of PDVSA subsidiaries and joint ventures, company sources said.
A bottleneck of tankers waiting for PDVSA to allocate export cargoes has worsened, according to PDVSA’s schedules and vessel monitoring service TankerTrackers.com.
TankerTrackers.com estimated on Thursday there were 23 supertankers, 16 of them near the Jose Terminal, the country’s main export terminal, waiting to load Venezuelan crude and fuel for export. That was up from 21 at the end of January.
Contributing to the shipping delays: Privately-owned shipping agencies working for PDVSA and its customers were placed on hold to revise their registration documents, the people said. Only two agencies continued to service companies.
The delays are worrying some customers whose cargoes of crude, fuel and byproducts have not been shipped on time, according to other people familiar with the matter.
On Tuesday, PDVSA head Pedro Tellechea, who also was appointed as oil minister after El Aissami’s resignation, named two new top executives at the company: Hector Obregon as executive vice president, and Luis Molina as vice president of exploration and production.
Reporting by Marianna Parraga in Houston, Deisy Buitrago in caracas; Additional reporting by Sudarshan Varadhan in Singapore; Editing by Paul Simao
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WASHINGTON, March 21 (Reuters) – A group of seven U.S. senators on Tuesday proposed legislation to raise the mandatory commercial pilot retirement age to 67 from 65, in a bid to address airline industry staffing issues.
The legislation first proposed last year by Senator Lindsey Graham and other Republicans now includes Democrats Joe Manchin and Mark Kelly, a former Navy pilot and astronaut.
The proposal, which would require pilots over age 65 to pass a rigorous medical screening every six months, follows complaints of pilot shortages by many regional airlines.
It comes as Congress is considering various aviation reforms ahead of the Federal Aviation Administration’s (FAA) Sept. 30 expiration of operating authority.
Graham said roughly 5,000 pilots will be forced to retire within the next two years. He noted hundreds of flights are being canceled due to a shortage of available pilots and crews.
The Regional Airline Association (RAA) praised the proposal, saying 324 airports have lost, on average, a third of their air service, including 14 small airports that have lost all service, and more than 400 airplanes are parked because of a lack of pilots.
RAA President Faye Malarkey Black in an email said raising the retirement age is “the one solution that will immediately mitigate the pilot shortage, particularly the captain shortage, which is an even more acute constraint within a constraint.”
She added that it also would reduce “wrongheaded age discrimination against healthy pilots.”
The Air Line Pilots Association (ALPA) opposes proposals to increase the retirement age. Even if the proposal is approved, the union said pilots older than 65 would still not be able to fly in most countries outside the United States because of international rules.
Graham previously noted that in 2007 the United States raised the mandatory retirement age from 60 to 65, and “the sky did not fall.”
Transportation Secretary Pete Buttigieg has previously said he does not support raising the pilot retirement age.
Some have urged the lowering of the number of hours experience needed to be a co-pilot.
The FAA denied a request last year by regional carrier Republic Airways for allowing only 750 hours of flight experience instead of 1,500 hours.
Reporting by David Shepardson
Editing by Bill Berkrot
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BERLIN, March 17 (Reuters) – Volkswagen (VOWG_p.DE) plans to invest in mines to bring down the cost of battery cells, meet half of its own demand and sell to third-party customers, the carmaker’s board member in charge of technology said.
Europe’s biggest carmaker wants its battery unit PowerCo to become a global battery supplier, not just produce for Volkswagen’s own needs, Thomas Schmall told Reuters in an interview.
PowerCo will start by delivering cells to Ford (F.N) for the 1.2 million vehicles the U.S. carmaker is building in Europe on Volkswagen’s electric MEB platform, he said.
Long-term, Volkswagen plans to build enough cells to meet half its global battery needs, with most production capacity located in Europe and North America, according to Schmall.
“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,” he said.
The carmaker was partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant.
Schmall declined to comment on further locations under consideration or where or when Volkswagen might invest directly in mines, saying the company would not disclose that information until the market was more settled.
“In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” he said.
AMBITIOUS ROADMAP
Making or sourcing batteries at a reasonable cost is a key challenge for carmakers like Volkswagen, Tesla (TSLA.O) and Stellantis (STLAM.MI) as they seek to make electric vehicles (EVs) affordable.
Only Tesla has pledged more investment into battery production than Volkswagen, according to a Reuters analysis – though even the U.S. EV maker is struggling to ramp up production and is recruiting Asian suppliers to help.
Few carmakers have disclosed direct stakes in mines, but many have struck deals with producers to source materials like lithium, nickel and cobalt and pass them onto their battery suppliers.
PowerCo, set up last year, is targeting 20 billion euros ($21.22 billion) in annual sales by 2030.
It’s an ambitious roadmap for a unit not yet producing at scale. Production will start in 2025 at PowerCo’s plant in Salzgitter, Germany, 2026 in Valencia, Spain and 2027 in Ontario, Canada.
Still, Schmall is confident the carmaker can expand quickly – and must do so if it wants to build an affordable EV, in which 40% of the costs come from the battery.
Volkswagen released on Thursday the details of a 25,000-euro EV it aims to sell in Europe from 2025.
China’s BYD, which also produces batteries, is far ahead of Volkswagen in the affordable EV race and outsold the German carmaker for the second time in four months in China in February.
REDUCING COSTS
In Volkswagen’s 180-billion-euro five year spending plan, up to 15 billion is earmarked for its three announced battery plants and some raw material sourcing.
The carmaker has so far nailed down raw material supply until 2026 – by which time the German and Spanish plants will be in operation – and will decide in the next few months how to meet its demand from then on, Schmall said in the interview.
It has also ordered some $14 billion in batteries from Northvolt’s Swedish plant.
“Bringing down battery costs further is a challenge,” Schmall said. “We’re using all the instruments with PowerCo.”
Asian producers like CATL, LG Chem and Samsung SDI dominate global cell production, with almost half of planned battery cell capacity in Europe by Asian players.
Half the staff at Volkswagen’s PowerCo are industry veterans from Asia, Schmall said, enabling the battery unit to enter the industry at the top of the learning curve.
($1 = 0.9427 euros)
Reporting by Victoria Waldersee; Editing by Susan Fenton
Our Standards: The Thomson Reuters Trust Principles.
STOCKHOLM, March 15 (Reuters) – For years, Sweden has been warned that its dysfunctional housing market, plagued by under-supply and kept aloft by low rates and generous tax benefits, was a risk to the wider economy.
Now those risks are becoming reality. Households with big mortgages are reining in spending as interest rates rise, and house-builders are pulling the plug on investment, tipping Sweden into recession.
The country is set to be the only EU economy experiencing outright recession this year. The crown is trading at around its weakest level against the euro since the global financial crisis, partly due to housing market worries, making the central bank’s job of curbing inflation more difficult.
“It’s not that no one saw this coming,” Riksbank Governor Erik Thedeen said at the end of February. “The Riksbank has warned about this … for a long time. And now it is clear that it is a problem.”
After years of ultra-low borrowing costs, the pandemic and the Ukraine war have served up a toxic cocktail of high inflation and rapidly rising interest rates to many countries.
But in Sweden, the structural problems rooted in its housing market are magnifying the effects.
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House prices in Sweden have almost quadrupled in the last 20 years, easily outstripping wage growth, boosted by generous mortgage tax relief, almost non-existent real estate taxes and a rental market with limited supply because of tight regulations.
Debt levels are among the highest in the European Union at around 200% of disposable incomes, much of which is mortgage debt. And around 60% of Swedes have floating-rate mortgages, meaning rate increases have an immediate impact on the majority of households.
Banking group Nordea (NDAFI.HE) expects household consumption to fall around 2% in 2023, while the National Board of Housing expects housing starts to fall around 50% in the coming year compared with 2021.
Many home-owners are already struggling with higher mortgage repayments alongside surging food and energy prices – even though the full effects of interest rate rises over the last year have yet to be felt.
Philippa Logan, a single mother of two, bought her 89 square meter (958 square feet) apartment in Ostberga in the south of Stockholm in 2017 and paid off some of the mortgage after getting divorced in 2020.
“However, in the last few months, the interest rate has almost tripled making it almost unaffordable to survive,” Logan said.
“The stress has been indescribable,” she said, adding she had been forced to take on extra work to make ends meet.
The central bank expects further rate increases in the coming months. Markets expect borrowing costs to peak at 4%, up from 3% currently.
“Our forecast is for the Riksbank to raise rates to 3.75 as a peak,” Gustav Helgesson, economist at Nordea said. “I think at that level we are very near some kind of pain threshold for households.”
HOME TRUTHS
The European Commission expects Sweden’s gross domestic product to contract by around 1% this year – the only country in the 27-member bloc likely to see negative annual growth.
Nordea expects GDP to contract by around 2%.
House prices are down around 15% since their peak in spring last year, a bigger drop than during the global financial crisis. Some regions have experienced a fall of as much as 40%, the real estate division of insurer Lansforsakringar said.
While Sweden is not alone in seeing big house price falls, its households are almost uniquely sensitive to interest rate hikes because more than half have floating rate mortgages.
In Germany, for example, most borrowers have fixed mortgages and rising rates have largely been shrugged off.
“No, we don’t have any fear with the mortgages,” said Hannah, a teacher in the city of Bochum, in the west of the country, whose joint mortgage with her partner is fixed at 0.9%.
“We have 15 years to pay back and it was all planned in a way that we could pay back even if interest rates rose,” she said.
In Canada, while debt levels are high, variable rate mortgages only account for about one-third of total outstanding mortgage debt, according to the Bank of Canada.
While some economists predict a mild recession in Canada, the OECD think tank expects the Canadian economy will grow around 1.3% in 2023.
A FIXER-UPPER?
Sweden’s housing problems date back decades, but have proven hard to fix.
Plans to ease rent controls have been fiercely opposed by the political left which believes introducing market forces would increase social division by pricing many people out of desirable areas of Sweden’s cities.
All the main political parties agree an overhaul of mortgage tax relief is needed, but none are prepared to give their rivals a stick to beat them with when elections come around.
Reintroducing a property tax, abolished in 2008, is seen as another sure-fire vote-loser.
Financial regulators have introduced tougher lending practices and tightened mortgage repayment rules. Sweden’s banks are among the most strongly capitalised in Europe – partly as a result of worries about the housing market.
These should prevent falling real estate prices from triggering a financial meltdown as happened in Sweden in the early 1990s.
But Sweden’s economy is likely to remain a hostage to imbalances in the housing market while its structural problems go unresolved.
“It’s up to the politicians to decide whether they want to deal with these problems and, more than anything, when,” Nordea’s Helgesson said. “In the current situation, it is very hard to tackle them.”
($1 = 10.6895 Swedish crowns)
Reporting by Simon Johnson, additional reporting by Maiya Keidan and Fergal Smith in Toronto, Anna Koper in Warsaw and Maria Martinez in Berlin. Editing by Jane Merriman
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SEOUL, March 15 (Reuters) – Samsung Electronics Co Ltd (005930.KS) on Wednesday said it will invest around 300 trillion won ($230 billion) by 2042 to develop what the government called the world’s largest chip-making base, in line with efforts to enhance South Korea’s chip industry.
The amount makes up most of the 550 trillion won in private-sector investment announced by the government on Wednesday, under a strategy that expands tax breaks and infrastructure support to increase the competitiveness of high-tech industries including those involving chips, displays and batteries.
Samsung’s manufacturing additions will include five chip factories and attract up to 150 materials, parts and equipment makers, fabless chipmakers and semiconductor research-and-development organisations, the Ministry of Trade, Industry and Energy said in a statement.
Other countries have announced plans to bolster domestic chip industries, including the United States which last month released details of its CHIPS Act, which offers billions of dollars in subsidies for chipmakers that invest in the country.
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South Korea, home to the world’s two biggest memory chip makers, Samsung Electronics and SK Hynix Inc (000660.KS), is seeking to improve supply-chain stability to become a major player in the non-memory chip field, currently dominated by chipmakers such as Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) and Intel Corp (INTC.O).
($1 = 1,305.1200 won)
Reporting by Heekyong Yang and Joyce Lee; Editing by Christopher Cushing
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LONDON, March 14 (Reuters) – British supermarket Sainsbury’s (SBRY.L) said on Tuesday it would take full ownership of the Highbury and Dragon store investment vehicles, paying Supermarket Income REIT (SUPR.L) 430.9 million pounds ($524.2 million) for its 51% stake.
Sainsbury’s, Britain’s second largest grocer after Tesco (TSCO.L), has held a 49% interest in Highbury and Dragon, which comprises the freeholds of 26 stores leased to Sainsbury’s, since it was created in 2000.
The deal will result in Sainsbury’s buying the freeholds of 21 stores which will continue to be operated as Sainsbury’s supermarkets.
The remaining five stores will be sold by Sainsbury’s, four of which it will lease back.
Sainsbury’s has also agreed to fully fund Highbury and Dragon’s bond redemptions of 170.5 million pounds on March 20 and 130.4 million pounds on July 13.
It said the acquisition and bond redemptions would be funded by cash resources and a committed unsecured term facility.
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Shares in Sainsbury’s, which trades from over 600 supermarkets and over 800 convenience stores, have increased 17% in 2023 so far.
($1 = 0.8220 pounds)
Reporting by James Davey, Editing by Paul Sandle
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HONG KONG, March 12 (Reuters) – China stock investors, already disillusioned by Beijing’s lower-than-expected economic growth target for the year, will be further disheartened by the shock collapse of U.S. lender SVB Financial Group, market participants said.
China’s CSI300 Index (.CSI300) dropped 4% last week, while Hong Kong’s Hang Seng (.HSI) tumbled 6%, as China’s moderate GDP growth target of around 5% for 2023 – set during the annual session of the rubber-stamp parliament – dashed hopes for a big stimulus.
The market mood could be damped further following Friday’s sudden collapse of start-up focused lender SVB (SIVB.O), which stirred heated discussion over the weekend in China about its fallout.
“The SVB failure is a barometer of macro risks … reflecting how asset prices are being impacted by central bank rate hikes,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management, predicting tougher times for highly-leveraged firms with illiquid assets.
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Although the event will unlikely trigger another financial crisis, it could have a negative psychological impact on China markets, he said.
SVB’s Chinese joint venture with Shanghai Pudong Development Bank (600000.SS) said on Saturday that it has a sound corporate structure and an independently operated balance sheet, in an apparent effort to pacify local clients.
But many Chinese tech start-ups, especially those with dollar funding, have opened U.S. accounts at SVB. At least one WeChat group with several hundred members has been formed by anxious Chinese clients of SVB seeking to safeguard their interest.
Lower risk appetite could mute any excitement from an expansion of the China-Hong Kong Stock Connect on Monday. More than 1,000 China-listed A-shares, and nearly 200 Hong Kong-traded stocks will be added to the cross-border investment scheme.
REMAIN VOLATILE
Li Bei, fund manager at Shanghai-based hedge fund house Banxia, said she has slashed stock holdings, and will “maintain a relatively low exposure”, citing a lack of good opportunities.
Prudent economic stimulus for 2023 and a relatively tight credit environment means “it’s hard for stocks to further go up from the current level and the market will remain volatile,” Banxia wrote in a letter to investors last week.
China kept its central bank governor and finance minister in their posts on Sunday, toward the end of the week-long session of the National People’s Congress (NPC), where Xi Jinping began his third five-year term as Chinese president. Li Qiang, a longtime Xi confidant, was promoted to premier to steer the economy, which grew just 3% last year.
Derek Lin, a portfolio manager with Boston-based Columbia Threadneedle Investment, said the government “does need a good year” but isn’t rushing to launch big stimulus, so “the market is trying to get excited, but there is some hesitancy.”
Stanley Tao, founder and CIO at Golden Nest Capital Management said he doesn’t expect a broad-based bull market in China this year as a soft property market will remain a drag on the economy. He is cautious about tech stocks that could be impacted by US-China frictions.
Still, domestic A-shares will likely outperform offshore China stocks, which are more vulnerable to potential spillover from the SVB collapse, analysts say.
Chaoping Zhu, global market strategist at JPMorgan Asset Management, said the SVB fiasco reflects tighter financing conditions for tech firms during the U.S. rate hike cycle.
“The concern is that we could be just seeing the tip of the iceberg,” Zhu said during a live broadcast on Saturday.
(This story has been refiled to fix the dateline)
Additional reporting by Samuel Shen and Georgina Lee; Editing by Raju Gopalakrishnan
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March 11 (Reuters) – The managers of Silicon Valley Bank’s (SIVB.O) investment banking arm, SVB Securities, are exploring ways to buy the collapsed lender back from its parent company, Bloomberg News reported on Saturday.
SVB Securities Chief Executive Officer Jeff Leerink and his team are seeking help to finance a potential management buyout of the business, the report said, citing people familiar with the matter.
Silicon Valley Bank and SVB Securities did not immediately respond to Reuters’ requests for comment.
There is no certainty that a deal will be reached and other potential buyers could also emerge for the unit, Bloomberg said.
On Friday, startup-focused lender SVB Financial Group became the largest bank to fail since the 2008 financial crisis.
California banking regulators closed the bank, which did business as Silicon Valley Bank, and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver for the later disposition of its assets.
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Earlier on Saturday, SVB Securities said its business operations would not be directly impacted by the FDIC taking control of its parent company. “SVB Securities is financially stable and will continue to operate as usual,” Leerink said in a statement.
SVB Financial Group is working with an investment bank and a law firm to find buyers for its other assets, which include SVB Securities, Reuters reported on Friday, adding that these assets could attract competitors and private equity firms.
Reporting by Kanjyik Ghosh and Mrinmay Dey in Bengaluru; editing by Grant McCool and Paul Simao
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